Rolls Royce issues notice to Spectrum Power

Power major threatens to terminate operations & maintenance over default on payments

Rolls Royce Industrial Power (India) Limited has issued a notice to Spectrum Power Company (SPGL) threatening to terminate the O&M (operations and maintenance) agreement for defaulting on payments due to it.

In an official communiqué sent to SPGL on May 5, Rolls Royce director R L Woodworth has asked the Spectrum Power management to pay the arrears amounting Rs 14.44 crore within 30 days from the date of notice.

"The notice is given without prejudice to all our other rights under the O&M agreement or otherwise," Woodworth said in the letter.

The issue of default on payment to O&M contractor by the SPGL management has come to light at a time when Spectrum Power's current management headed by IDBI has reportedly approached the APGenco management to run the plant a week ago.

The other stakeholders in the company like Spectrum Technologies Limited of US have been apprehensive about the whole episode.

"It is a clear ploy by Rolls Royce to get out of the project in the wake of the controversy over the alleged kickbacks paid by it for securing the O&M Contract," a representative of the Spectrum Technologies Limited told Business Standard.

The Rolls Royce Industrial Power(India) Limited has a equity component of Rs 56 crore in the company while the Jaya Food Industries represented by its former managing director M Kishen Rao has a 26-crore stake.

The Spectrum Technologies Limited represented by M Mohan Rao has about 29 crore equity. Rumours are doing the rounds saying that both the Rolls Royce and Kishen Rao are planning to move out of the company.

APTransco had in last January issued a notice to SPGL management for reduction of the capital cost of the Spectrum power project by Rs 97.71 crore based on the statement made by the former managing director Kishen Rao before the Enforcement Directorate.

The above measure would mean an excess payment of Rs 170 crore to the company by the APTransco since the commissioning of the power project in 1998.

According to the notice issued by the APTransco, the alleged kickbacks received by the Towanda Services Limited (TSL) of Kishen Rao and other 'bogus' contracts entered by him in the name of the power project has resulted in enhanced capital cost.

In the case of Spectrum power, the bulk tariff, that include both fixed and variable costs, have been determined on the basis of the total project cost.

Incidentally, APTransco too has been maintaining silence on taking further action based on its earlier notice even though SPGL management is said to have failed to respond on the issue till date.

IDBI on behalf of all the domestic lending agencies has taken over the management of the power company last September, after the previous management had entered in to a web of controversies resulting in payment problems.

Several power companies, including Reliance, GMR, TATA Power, have been evincing interest to take over the project but the legal tangles have so far kept them away. Spectrum Technologies Limited which has approached IDBI for the purchase the entire equity, is keenly following the developments.